INSTANT VIEW - Euro zone recession confirmed

(Reuters) - A fall in investment and a negative contribution from trade made the euro zone economy contract in the third quarter, pulling the single currency area into its first technical recession, data showed on Thursday.

ECONOMIST COMMENTS

HOWARD ARCHER, CHIEF EUROPEAN ECONOMIST, IHS GLOBAL INSIGHT:

"The breakdown of euro zone GDP for the third quarter was worrying. Consumer spending was only flat, business investment contracted significantly for a second successive quarter and net trade was sharply negative as exports saw very weak growth. Indeed, the overall contraction in euro zone GDP would have been much sharper in the third quarter but for a building up of inventories adding 0.3 percentage point and elevated government spending adding a further 0.2 percentage point.

"It seems odds-on that the fourth quarter will see deeper euro zone contraction as the financial crisis increasingly impacts on the real economy. Indeed, latest economic releases show euro zone economic sentiment plunging to a 15-year low in November, while manufacturing and service sector activity contracted at record rates in November according to the purchasing managers' surveys.

"We expect euro zone GDP to grow by just 1.0 percent overall in 2008 and then to contract by 0.8 percent in 2009 as it is hit by sharply weaker global growth, extended financial sector problems, rising unemployment and very weak business and consumer confidence.

"Given these factors, it will take time for sharply lower oil prices, the retreat of the euro, lower interest rates and widespread fiscal stimulus to generate recovery.

HOLGER SCHMIEDING, BANK OF AMERICA:

"There is no surprise. Consumption is flat, investment down, government expenditure up and exports not much of a help. Of course, it's just a prelude to a serious recession as two of the months, July and August, were before the real crisis erupted. We expect a 75 basis point cut from the ECB today."